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Robbing from the rich and giving to the poor is the narrative we heard as young lads and lassies growing up. As the story goes, those mean-spirited, greedy, rich people were oppressing the poor underclass and Robin Hood was the hero. Let's not lose sight of the evil and corrupt Sheriff of Nottingham who would fill his pockets at every opportunity. In the Sherwood Forrest fairy-tale, money was taken from the rich and given to the poor who certainly benefited by the unwilling benevolence of their benefactors. The moral? Rich people are greedy and authority is corrupt. However, in the real world there some slight differences. Let me explain.

Our economic fabric consists of a public sector and a private sector. However, the public sector can only exist if the private sector is able to support it. Hence, if the private sector is weak, tax revenue will fall, and government will have to borrow to operate. Therefore, a healthy economy hinges on the success of the private sector.

The success of our economy is also very dependent on the degree to which "risk-takers" prosper. You see, we owe a lot to those entrepreneurial-minded, 'captains of industry' who risk their capital to start a new business. And it's these businesses that provide the jobs that people come to rely on for their sustenance. Therefore, as "risk-takers" prosper, many prosper. Hence, it's in everyone's best interest when people succeed. For without this success there would be fewer jobs and greater poverty.

Today, a large percentage of the population has bought into the idea that the rich become rich at the expense of the poor. As I have already explained, the rich become rich because they take risk. It's not "greedy rich people" who are the problem in America. It's the politicians that try to convince you of this fallacy. Think about this. What if all rich people suddenly left the country and moved to Antarctica? America would become like a third-world nation!

At the core of the argument is this: What services should the Federal government provide? Whatever your view, big government or small, today, the federal government collects about $2.3 trillion in tax revenue per fiscal year and spends about $3.5 trillion. The shortfall of$ 1.2 trillion is added to the national debt. Clearly, this is unsustainable. What's the solution and why haven't we had a more robust recovery? One word. Unemployment.

We have an unemployment rate that's been over 8.0% for three-and-a-half-years! Today, there are nearly 12.5 million who are considered "officially" unemployed. The actual unemployed number exceeds 22.6 million. Consider this. If we could get a third of the officially unemployed back to work (and paying taxes), the increase in tax revenue would be significant. Then, as tax revenues rise, the deficit would decline, and the argument to raise tax rates would lose steam! In short, the more people paying into the system, the better. The fewer people that pay in, the greater the burden is on those who do.

The great challenge for government is that they must determine, on a case by case basis, who qualifies for assistance and who does not. For those who have a legitimate reason, there are programs to help. Hence, one function of government is to redistribute a portion of tax revenue to help those who are in need. In fact, many government programs require some sort of means testing. Since 1970, however, this type of entitlement spending has exploded as shown in Table A below.

Year

Means Tested Entitlement Spending

1970

10.1 Billion

1980

45 Billion

1990

95.7 Billion

2000

232.6 Billion

2010

558.8 Billion

2011

569.4 Billion

I recall back during the 2008 campaign when candidate Obama made a gaffe with his "Joe the Plummer" redistribution comments. Clearly, and this by his own admission, he is a redistributionist. But when you take too much from the rich, risk taking declines, private sector growth is hindered, government debt rises (along with unemployment), and the economy suffers. Free handouts may be a vote magnate, but they are also an impediment to fostering a strong work ethic, and hence, a healthy economy. At some point, we may realize that the policies of the past have wrought a present that none of us will enjoy or recognize. As the number of people receiving government benefits rises (I am not talking about the truly needy or those on Social Security), at some point they will outnumber those who are paying into the system. Then it may be too late to retake our country and the road to Debtville will be a certainty. How's that for cheerful? Prozac anyone?